Taxes are an unfortunate part of life. If you work, you pay taxes– it’s that simple. Many people try to avoid paying taxes, and this nearly always results in fines being issued and sometimes prosecution.
Just knowing that you need to pay taxes isn’t enough, however. There is a lot that you need to know about them so that you don’t run afoul of tax laws. It is especially important to educate yourself about taxes if you are a business owner or are self-employed.
Here are six things that you need to know about your taxes.
5498-SA
If you are the custodian of an MSA or an HSA account, then you need to complete a 5498-SA form. The 5498-SA reports annual contributions to these accounts, which are then used to pay for medical expenses. Once the form has been completed, then it must be sent to the IRS. As with all things tax-related, there are penalties and punishments that can be issued if you do not complete and return the form diligently. If you are the account holder, then you do not need to do anything—the account’s custodian is responsible for filing it.
Non-taxable Income
Depending on how much you have earned this year, you may not even have to file a tax return. It is a good idea to first check with the IRS and work out what the amount of money you can earn without paying tax is. Generally speaking, if you earn $12,500 or less, then you have no obligation to file a tax return and can continue to work or earn money tax-free. If you earn over that amount, however, then you will have to file a tax return and if you do not then you can get into a lot of trouble. Not reporting one’s income to the IRS is called tax evasion, and it can result in fines and other penalties. In very serious cases, tax evasion can actually result in imprisonment. What this means is, that if you earn a dollar over the minimum tax threshold, you have to report it.
Hiring Accountant
Very few people are actually good at filing and paying their taxes. They are an absolute nightmare, to be honest. If you are one such person and agree that taxes are a nightmare, then you may want to consider hiring an accountant. If you are a business owner and think that hiring an accountant would be too expensive, then one alternative for you to consider is outsourcing your accountancy needs to an international accounting agency. These companies can be very affordable to outsource to, not to mention easy to work with. An accountant will also be able to exploit loopholes and bring down your tax bill.
Can’t Pay? File Anyway
Even if you can’t pay your tax return, it is a good idea to file it anyway. As already mentioned, failing to file a tax return or declare income is considered tax evasion, which is a crime. Being unable to pay your taxes is not a crime. The IRS, despite its reputationis very easy to work with. You can arrange a payment plan or sort out some kind of arrangement where you pay your taxes once a month. There usually is a minimum amount that can be paid, but this amount is calculated according to your income and savings.
Due Date
When it comes to filing your taxes, you need to make sure that you file them on time. Missing IRS due dates can get you into a lot of trouble. While filing late isn’t going to get you arrested or charged with tax evasion, it could result in you getting fines. The fines and penalties issued to people that are late on their taxes depend largely upon how late they were and whether or not you are able to afford to pay your taxes (as well as what caused you to be late, to begin with).
Allowances
Lastly, there are lots of different things that you can get tax breaks and allowances for. Most people are completely unaware that they can get breaks on their taxes. If you are interested in potentially exploring what kinds of breaks and allowances you can get, then it is a good idea to hire an accountant. Navigating complex tax breaks and allowances alone can be extremely difficult, but an accountant will be able to help you. An accountant will also be able to file your tax for you, which simplifies the entire process and makes it a lot less stressful.
Taxes are an unavoidable part of life. Whether you are a business owner or an employee, it’s essential that you file your tax return properly. In order to file a tax return, you might want to hire an accountant or an outsourcing firm.
